Australia is facing a housing crisis in its capital cities and for many people home ownership will never be a reality, writes Amy Bainbridge. Unless living in regional areas becomes a viable option, how are we ever going to fix this modern day conundrum?

Australians live in a vast expanse of a country, yet our dilemma is that we all seem to want to live in the same spot.

There are people saving to buy homes, others who are enjoying the fruits of their investment, those who are struggling to rent in a competitive rental market, some on tight budgets to make mortgage repayments, and everyone else in between.

The ABC put the call out on social media this week to find people to speak to for a story on house prices. Our coverage was linked to yesterday's Reserve Bank decision on interest rates which saw rates lowered by 25 basis points.

We wanted to know just who the interest rate decision would impact most.

We wanted members of Generation Y, in the 18-29 age bracket, to tell us about their views and experiences in the housing market. We wanted to know what they felt their prospects were of being able to buy a property one day.

We also wanted Baby Boomers to tell us about their experiences. We were overwhelmed with volunteers. The property market is something that gets people talking - but for vastly different reasons.

New analysis from Roy Morgan Research points to a generational divide in housing.

There are the Baby Boomers, many of whom have worked hard for years and have all but paid off their mortgages. Some are now also enjoying the tax breaks that come with owning investment properties. Then there's Gen Y, for whom property ownership may only become reality when it's handed on to them by their family in the distant future.

Roy Morgan Research says more members of Gen Y are renting than ever, fewer have mortgages, and more are have travelled overseas in the past 12 months than ever before.

Many members of Gen Y see owning a home or apartment as a sign they'll be tied down and a slave to their jobs.

It's such an unrealistic dream anyway that research suggests this demographic figures they should invest in life experiences instead.

The housing market is so competitive that buying a home has become a lottery. Want evidence? Talk to anyone who's attended a soul-destroying auction recently.

There are many people in Australia for whom home ownership will never be a reality.

There are horror waiting lists for public housing in Victoria. So a compounding factor of all this is what it's doing to the rental market.

The Australian Housing and Urban Research Institute (AHURI) is quick to point out that many people on low incomes are being priced out of the rental market. That's because those on middle incomes are renting while they save for a deposit, rent because of a change in personal circumstance, or rent for convenience while their investment property lies elsewhere.

AHURI says housing un-affordability doesn't just affect those who want to buy. There's a broader effect on society.

I'm on the wrong side of 30 to be labelled a Gen-Yer. The property market has been an unpleasant adventure. Over time, my better half and I scraped together what we thought was a pretty decent deposit to buy a home. But almost half of that will be chewed up in stamp duty.

To keep a lid on stamp duty and live within our means, we searched Melbourne high and low for something affordable. We looked increasingly to Melbourne's fringe and seriously considered Werribee, 30 kilometres to Melbourne's west.

Werribee's town centre is charming, yet it consistently receives a bad rap from those who've never bothered to visit.

In the end, the lack of infrastructure turned us away. Without efficient public transport, and amid warnings of the unreliability of the train system, the commute after a long day was too daunting.

It was the same to Melbourne's beautiful north - houses are more affordable at the foothills of the Dandenongs, but catching the train to work would take around an hour, and that estimate does not factor in the commute to and from the station at either end.

To me, this is the crux of the problem.

Without decent infrastructure and public transport, how are we ever going to fix this modern day conundrum?

I'd live in regional Victoria in a heartbeat if I could commute to work on a high-speed train. But this requires real vision and commitment to build projects like this in an expensive country.

It takes boldness from politicians, and that's something that's been lacking for some time.

How can we fix this? Continuing the conversation about housing is a good start.

Amy Bainbridge is the ABC's consumer affairs reporter. You can follow Amy on twitter: @amy_bainbridge. View her full profile here.

Comments (190)

Comments for this story are closed.

Righto:

08 May 2013 4:08:07pm

Talk to any Town Planner, we know how to address it but politicians the the public ultimately don't want to address it.

(1) Everyone owning a home and yard is not realistic in the modern era. It creates low density sprawl which we cannot afford to service with infrastructure, particularly public transport as it means the catchment of demand is always going to be too small to justify the expenditure.

(2)Townhouses, apartments and similar housing solutions need to be the focus, but they need to be done properly with providing common use parks etc to be attractive enough.

(3) Alternatively, people have to accept lower levels and quality of infrastructure such as roads, hospitals, water and sewage etc.

tomtoot:

Hi Righto: Your solution sounds as simplistic as that of the UK in the 70's and that was then an ill advised solution resulting in what is now considered a disaster.

Some people will prefer a 1/4 acre block and some will be happy to live in an apartment in a high rise but one thing is for certain we don't all want the same thing

Town planners have one vision - state governments have an other - often opposing views - and lately we have state governments over ruling or curbing local council views which can be, and, often is against the interest of local residents and rate payers.

Worse is possibly yet to come - I fear we could possibly see a dilution of powers of state governments - then again it might not happen?

Rusty:

08 May 2013 9:43:54pm

Righto,

You are speaking, as a Town Planner (Town Wrecker) clearly out of self interest - more poorly constructed dog boxes on tiny blocks of land mean more work for you and your spiv mates in the construction industry who make a motza out of dense housing...and councils collecting more rate revenue per hectare...and treating people like battery hens...

And decent sized houses on decent sized blocks does NOT mean poor infrastructure...50 years ago we had good schools, hospitals, water, sewage etc ...

JohnM:

09 May 2013 9:26:35am

Denser population means- more efficient public transport,- less distance to commute (which means more time at home or in the local community),- lower cost of infrastructure (currently at $ millions per km for new development)- less destruction of the surrounding environment- less use of motor vehicles for transportation

Dense population with shared and plentiful local parkland is a very sensible way to go. So too is dispersing the people and the employment into far more towns and regional centres.

sdrawkcaB:

09 May 2013 10:35:25am

I deal with Town Planners. Little Hilters that have a town planning scheme to over interpret and local government law to hide behind. Lately, they have decided they know more about Architecture then Architects so that?s a feather in their cap I am sure.

Two points that are immutable.

The first is any more than 4 stories and the average person starts to go bonkers. It?s related to the need to have a connection with the ground.

The second is communities greater than 8000 are bad news. Anymore then 8000 and people become strangers.

The first study on this was done when the poms found out their medium rise housing estates were fast becoming slums. We are talking 1960?s. There was another done in the eighties which, lo and behold, came out with similar findings.

The solution is to build communities and not towns.

Planners, like economists get carried away with themselves and forget they serve the community, its not the other way around.

With that, no, denser population is very definitely not a sensible thing to do. The factors you mention do not outweigh the social cost.

Coogera:

09 May 2013 9:49:38am

Rusty:

The problem of too many people demanding housing is a real one and it will not change overnight. Outer development means no public transport creating even worse chaos on roads. The only solution is to create high density living around existing transport/ shopping hubs thus creating a viable pubic transport system.

ethos:

09 May 2013 11:35:11am

Yes Rusty you are correct to many people. Here in WA we have to put up with all the 457 visas . They are renting all our houses, at top prices because they are working on the mines they can afford the higher rents.Ordinary Australians are finding it difficult to compete for rentals they simply can no longer afford. One might argue that the mines need these 457 but to the deterement of our working class Australians?. WA has more families living on the streets than ever before and our state govt still does nothing to help the situation, no money has been spent on affordable housing,a lot of lip service nothing more.

ron:

09 May 2013 12:31:42pm

Rusty

Not all apartments need to be 'dog boxes'. The current building practice in developing suburbs is a tiny block with an oversized house with very little yard. You can almost shake hands with your neighbour through the bathroom window. It is so close to being an apartment style but only at ground level making infratructure more expensive per capita as mentioned by Righto.

Higher density housing means building up with less wasted space between each. Current developers try to squeeze as many into a single block as possible. Changing the design of apartment buildings to provide real living space and shared facilities such as BBQ & outdoor entertaining would definitely make sense. Works in many European countries why not here?

The other option to reduce the congestion is the 1 child rule and no immigration.

Coogera:

09 May 2013 9:43:17am

Righto:

Fully agree. Additionally there are opportunity costs to consider in government infrastructure. Large blocks represent a major cost to government because they do not allow the full utilization of existing infrastructure. In filling with high density living around transport/shopping hubs is definitely the way to go.

Budovski:

09 May 2013 11:10:35am

Sorry but town planners are part of the problem.

1) "Everyone owning a home and yard is not realistic in the modern era". Why not? We have 7 million square kilometers and 22 million people. Why should Australians, the 3rd wealthiest people on the planet be forced into flats and urban ghettos? Condensed living is a pipe dream no one wants to take part in, hence we have urban sprawl. The best option is new cities.

2) "Townhouses, apartments and similar housing solutions need to be the focus" No they don't, new cities connected with high speed rail and good roads should be the focus.

3) "people have to accept lower levels and quality of infrastructure" Why should they? Why can't we have a few new cities to spread the population but retain nice urban lifestyles? What you describe is an appalling dystopia devised by trendies that Australians categorically reject. As is evident by their choice to live in suburbs with backyards and parks rather than urban ghettos and flats.

There is not one logical reason Australians should live in high density housing. We are a huge county, not Hong Kong.

Blzbob:

09 May 2013 8:36:48am

I think I'll agree with damon.Thank goodness the SA Labor government spent millions on a desal plant that will now be mothballed until we need it, because don't fool yourself, when we oncwe again need it, the one we have wont be enough.

You will claim everything is fine, until it effects you personally and then you will blame the government.

blax5:

09 May 2013 11:27:23am

That's right. I am in SA and cannot believe the witchhunt against that desal plant - given that we cannot bring back the Adelaide population of 600 K from 1975, now 1.2 million. Environmentally, it might be better that it wasn't there but with more than a million it needs to be there. There is also the aspect that some want us to be independent from taking Murray water which desal plants might enable.

It is an insurance policy. We've had only half the rain so far, and if that continues, we'll activate it in January. Every time we look at the weather map, the cloud/rainbands are horseshoe shaped - nothing for SA.

We came to Australia to live in a regional area. After 16 years we left. Everything was 20 % more expensive and for everything you sold you had to give huge discounts because they knew they had you over the barrel. If you are public servant or financially independent it's different.

ron:

09 May 2013 12:36:13pm

Blzbob

The issue is not the amount of water available - its the amount of water wasted. Same as food. It is estimated that nearly 50% of global food production goes to waste. We can support a bigger community IF we reduce the waste. We can avoid congestion by building smarter - both in accommodation and infrastructure.

Martin:

Got proof of this? A lot of immigrants I see are just shop keepers and taxi drivers who just fulfil the needs created by themselves.

I'll be voting for the Stable Population Party in September. Bigger, not better. It will be interesting to see how they go.

There are other ways we can pay for self entitled boomers who had cheap housing, then decided to snap up units as investment properties to fund lavish retirements whilst claiming pensions and the like.

Simply raise a tax here and there, until they're gone. Importing so many immigrants just kicks the can down the road and is a ponzi. As immigrants get old and will require pensions and health care too.

Dean:

09 May 2013 1:23:39am

Utter nonsense.

Most of Australia's farmland is used by non-intensive farming methods. Melbourne itself could double in size to the north and west without putting much pressure on anything. We've got a desalination plant, ability to recycle water and the land is flat as a tack in many directions.

Australia is a massive exporter of food, especially meat and has plenty of room to grow. Not to mention fitting probably twice the population of Melbourne into the existing footprint with some decent town planning of higher density living. However, high density living seems short sighted with todays communication networks.

Aussie Sutra:

Coogera:

09 May 2013 10:46:20am

Dean: The major reason Australia's primary production is non-intensive is a lack of water. And of course even if you can irrigate you can develop salination problems. In a drought, there is nothing to irrigate with. The north however does offer a chance. There are limits to development.

Aussie Sutra:

09 May 2013 10:40:45am

Well said Damon. The attacks will start on you from the simple minds who think that the amount of floor space a standing human takes up is all that is required to sustain that human throughout their life.

Nifty Fifty:

08 May 2013 8:27:08pm

So that people can move house more freely to live in one that suits the stage of life they are in. Stamp duty is a crazy tax on those who choose the change address when work, school, retirement, age.... make it sensible to do so.

A more responsible method of raising the revenue is an annual property tax with heavy loadings for holiday underoccupied and vacant properties.

Devil's Advocate:

Dean:

09 May 2013 1:24:56am

The main question is why does the Govt hit you with Stamp Duty at the same time you have to stump up a deposit? Why not hit it up after 10 years, or when you sell? They'd get more money that way, in most cases. Perhaps at least give the option to homebuyers.

ron:

09 May 2013 12:45:21pm

Andrew

Seems you hit a raw nerve with the stamp duty.

While unpopular so are any form of revenue raising measures. For some reason people don't want to assist the government with raising revenue but are quite willing to criticise the government for not providing.

While annoying for those who relocate frequently, its removal would only increase demand as investors would benefit most. At the end of the day a house should be about a place to live not a means for profit.

tony:

08 May 2013 4:17:00pm

Simple solution, which would tie in with Superannuation & retiring babyboomers - build more self-run retirement units in regional areas. Many retirees would find this irresistable. It would provide building and other jobs in the country. Take a survey, outline the benefits (quieter, more quality housing for your dollar, cheaper purchase cost) and the drawbacks (higher food prices, less services). Less financial struggle in a sunny country town, leaving the city for the new breed of commuters. Many born in country areas would like to return, but home prices there have skyrocketed in the meantime. It could create a self-propelling 'circle of life' for those whose budgets are not quite city friendly and/or for other reasons.

gerry:

"Simple solution, which would tie in with Superannuation & retiring babyboomers - build more self-run retirement units in regional areas. Many retirees would find this irresistable."

ahha ha ha ha ha .. in your universe maybe, but not mine

I don't want to live in isolation or the bush or whatever you think it is babyboomers want.

I'm a boomer and I live inner city, have 8 investment properties and live on POSITIVE gearing children .. negative gearing is good to offset tax when you're building up, but ultimately you want income.

I have little sympathy for people who want their lifestyle and a house as well, if you can't afford both you don't get both. I grew up poor and worked hard to build my business and assets while mates were going overseas and driving fancy cars.

If you want property, you have to sacrifice everything else.

Demanding that everyone else get out of the way and let you have property on the cheap is not realistic and despite your whining, will never happen.

I don't mind the country, I visit it often, but could not live there, I grew up in a small town and never want to go back to that isolation from the world.

You all want the benefits of inner city, but where ever you choose to be, and one day will realise you can't have your own way with everything .. poor babies.

Mark:

09 May 2013 2:23:20pm

You are part of the problem. You assume it is the same for us now as it was for you back then. Housing was cheaper reletive to median income back then, and could be bought on a single income, now it takes a minimum of 2 incomes to service a mortgage.

How dare you tell us that we're lazy when you enjoyed low prices relative to wages and one of the greatest asset inflationary periods in the history of Australia. How absolutly dare you suggest that we don't own houses because we don't work hard enough. I work 5 days a week and between the cost of renting, the cost of food, the cost of electricity and the cost of water, it's not looking like I'll be able to save a deposit until I either spend another 10 years climbing the corporate ladder, get a wife that'll help me save, or quite this job and go and work in the mines.

How about you get off your high horse and have a look at why Gen-Y isn't buying housing? An entire generation aren't just lazy no hopers.

blax5:

RealReformForAustralia:

08 May 2013 4:18:35pm

Housing, clearly, is a scarce resource. There are more people who want to own their own home than there are affordable homes available for all such people to be able to purchase their own home. Developers make money by selling homes. The more homes they can sell at a profit, the more money they make. There is a limit to the minimum amount that a developer will sell a property or property deal. That bottom boundary is represented by the costs of the developer. If the developers costs went down as the market turned down then the developer could attract more buyers by lowering his or her prices. But that does not happen.

Budovski:

CF Zero:

08 May 2013 4:23:31pm

Whats new is that Baby Boomers and their elders, the silent generation are still healthy and living at home thanks to medical advances. Parents are competing with their own children for housing, families are started later in life resulting in less healthy offspring, our biology is not based on economy or society.

There is a couple of solutions, withdraw tax payer medical support for longevity treatments such as cholesterol medication, pay for it yourself & sell your house to do so.

Increasing the deposit required would also lower prices because there would be less buyers, say to 30%. This would force sellers to lower the price so buyers could be found.

Stop immigration. Do you want your kids competing with cashed up foreigners for housing? Related to this, we should force universities to stop offering positions in Australia if a course can be completed online, if its really education and not residency so called "international students" this wont matter to them.

Of course more land could be released but this lowers the asset prices of a powerful voting block, the baby boomers.

Mycal:

08 May 2013 8:50:26pm

"There is a couple of solutions, withdraw tax payer medical support for longevity treatments such as cholesterol medication, pay for it yourself & sell your house to do so."

My wife is 70, she just had a kidney problem and has started dialysis. Is that your idea of a longevity treatment? I have supported myself and paid taxes all my life for the medical support she now receives. I will happily pay for it myself if you will refund to me the proportion of those taxes and medicare contributions I have made in the last 50 years that go to provide the medical and health infrastructure we have in this country.

I am also curious, what are you going to do with your parents should they ever require cholesterol medication?

bob:

09 May 2013 10:12:34am

The taxes you paid went to supporting your elderly parents at the time. None of them were banked or invested. Now I will pay taxes to help you and your wife and I am happy to do so, that is how it works.

Jungle Boy:

I'm sorry for your wife, and also sorry that you completely misunderstand tax.

When you pay tax, it goes into a pool, for the government of the day to apply as it sees fit.

It does not go to a personal account for you to draw upon later. It does not work that way now, it has never worked like that in the whole history of taxation over thousands of years.

The amount of benefits you receive from today's government is completely unrelated to the amount of tax you may have paid in the past. Otherwise wealthier people would get more benefits, and poor people (who pay no tax) would get none.

Dean:

It's been proven again and again that the best (and usually only) way to reduce traffic on the roads is to provide public transport as a viable alternative.

That way the roads would be left more open to freight and workers who use the roads (tradies, delivery vans etc) rather than commuters.

If they build more roads, like the east-west tunnel, they're just going to fill up with people not bothering to catch the train.

A 3m wide train corridor can carry a few thousand people every 10 minutes. A 3m wide road can carry less than 1000 people per hour. I'll leave it for you to do the maths on which could and should be utilised more.

sandman:

And again it's also been proven that freight, tradespeople cannot use public transport efficiently.

Now public transport can move people sure, byt you completely ignored my point, that not everyone can use it.

That's the problem with this debate, one half, yours, refuses to listen or even consider the other sides.

I'll leave you to work out how that will pan out in votes OK, I will not be lobbying my local member for public transport because some sanctimonious know it all tell me "it's been proved" that he is right therefore I must be wrong.

Jim:

09 May 2013 11:55:32am

I don't think that you read Dean's comment properly.

He was saying that better investment in public transport not only benefits those who can use public transport, but it also advantages those who can't use public transport. Why? Because it removes the cars used for commuting from the road, leaving more room on the roads for tradespeople, delivery trucks and so on.

In short, greater investment in public transport is a win-win situation - those who go to work in the morning and stay there all day get to use efficient buses or trains, and those who need to use the roads to drive around all day get to do so more quickly and efficiently.

This shouldn't be an argument about public transport versus roads - it should be a discussion about how each can complement the other.

Pennpenn:

09 May 2013 12:36:43pm

It seemed like Sandman was talking about improving the quality of the roads that exist more than building new roads. Road infrastructure shouldn't be left to rot even if the public transport system is excellent.

AngronTheRedAngel:

08 May 2013 4:45:19pm

It's simple, really... we kill the batman.

What I mean is that we need to remove the problems stopping people such as myself from entering the property market. I'm aged between 25-35 (I'd rather not say), work full time in a middle-management role earning between $50,000-$65,000 p.a. I'm married, and my wife, aged between 20-30, works full time in admin, earning between $35,000-$40,000. We don't have kids, and have a joint debt (from our wedding and 2 Credit Cards) of less than $40,000. We own 1 car between the 2 of us, and we rent in Rural-ish Adelaide. Property here is relatively cheap, compared to Sydney, Melbourne, etc.

But we can't get a home loan. Why? Because in 2006, I had an issue with Vodafone, which caused me to cancel my contract with them, and move to Telstra. They defaulted me for $1516.00, a fee they later waived in full. The default they refused to remove, as have Dun & Bradstreet. Other than that, my credit file is flawless, as is my wife's. I can get a car loan with no trouble, and the same with credit cards, etc, but have been declined twice for a home loan, even with $25,000 in savings. 1 telco default makes me a bad risk.

Mycal:

08 May 2013 8:42:02pm

Not sure about your finances AngronTheRedAngel, but you may have a cause for action regarding Vodafone and you may be able to have the record expunged, unless of course you really did fail to meet your legal obligations to them. One point though, home loan brokers/banks etc tend to favour savings over debts. maybe you should make a concerted effort to turn the debt around?

Adrian:

08 May 2013 9:54:45pm

So you have lifestyle debt of $40,000 already plus whatever your car loan is? I reckon that has a bit more to do with the difficulty getting a home loan. You need a history of saving and a deposit to do that. At the moment you savings don't even cone close to covering your debt. Unless you pay off your wedding debt and credit cards and then start saving you'll have no chance. And it's nobody else's fault.

Applaudanum:

"What I mean is that we need to remove the problems stopping people such as myself from entering the property market"

"(We) have a joint debt (from our wedding and 2 Credit Cards) of less than $40,000"

Do you see the connection? What's stopping people entering the property market are their lifestyle choices. A couple in your position who didn't fork out for the big wedding or whack some items on the credit card could do it easily. They'd be in a position where their home purchase (in the long term) is cheaper than rent.

AngronTheRedAngel:

09 May 2013 10:25:21am

Maybe I failed to make this point clear, but my wife and i have a total combined debt of less than $40,000, which includes our wedding, 2 credit cards and a car loan (all combined into a single, consolidated personal loan), and total combined savings of just over $25,000. We also pay more than double the minimum repayments on all our debts, and aside from the dodgy Vodafone issue, have no defaults or credit issues. We earn a combined annual income of just under $100,000. We have no children. Out of our monthly pay, we save approx $1000, pay off approx $3500 in debt, pay our rent, and have flawless repayments with all our banks, bills, etc. We don't own any flashy gadgets, we don't eat out, and we don't party (I dislike clubs/pubs). We can't get a home loan.

My friends, both under 30, married less than 12 months, with 3 children, more than $100,000 in debt due to a wedding and 2 new cars, who until married lived with their parents so have no rental or savings history, had no deposit and a fair few defaults inc Telco and Credit Cards, got approved for a $425,000 home loan. Someone explain?

Steve Mount:

Well, let's see. Between you and your wife, you earn a combined income of between $85,000 and $105,000, and you have no children. OK.

By any measure, that's a substantuial income, for no children.

But you have a debt, of credit cards and a wedding, of $40,000???

How in heaven's name does anyone run up a debt of that amount, especially on such a good income, and on such menial things? Where did it all go?

Some advice. Fisrtly, clear your debts. $25,000 in savings means nil when you have $40,000 in debts, especially when they're credit card and wedding costs. This is not a good look for a home loan.

Put the $25,000 to your debts, NOW. Then, curtail your spending to the minimum so that you can pay off the rest of your debt. Message : CLEAR YOUR MISCELLANEOUS DEBTS, AND STOP SPENDING MONEY THAT YOU DON'T OWN. Otherwsie, lending institutions will see you as a bad risk.

Thern, start saving a deposit towards a home loan. Yes, it sounds laborious, and long winded, and it surely isn't the high life.

But what, exactly, do you want? The high life, or a home of your own? Or both?

Huonian:

08 May 2013 4:47:14pm

The problem is that folk want to live in the cities. Take a step back and you'll see how batty it is that Australia, with so much land and so few people, has overcrowding problems, such as a housing shortage.

Fortunately, technology may make it possible for more of us to work away from the CBDs. In which case, Amy, a house in a regional area - overlooking a bay somewhere or up in the mountains - would be the answer. And you'd avoid the rush hour.

And, yes, stamp duty is a rip-off for homebuyers. But that won't go until State governments learn how to manage their budgets much better.

The problem is that so many people have a vested interest in inflated housing prices. If only homeowners realised that a rapid rise in the value of their home doesn't actually mean they are richer....after all, if you sell, the value of the home you then buy or rent has gone up as well. Rapidly rising house prices suit the real estate industry and state governments. And councils who can jack up the rates based on property values. And banks who can then tempt folk into "redrawing" some of their equity - ie going further into debt. That's a pretty formidable array of vested interests wanting house prices to keep going up. On the other side, those who want house prices to fall, are.........well, who?

Perhaps it's time for a gutsy political leader to run with the idea of removing the capital gains tax exemptions for private homes. And scrapping the negative gearing provisions for investment properties. The extra tax thus gained could be used to scrap stamp duty.

crow:

and what happens to those rental properties that are no longer viable if they cant be negatively geared?

hint they get sold to new home buyers who would would have otherwise been renting. thus the reduction in rental properties is matched to a reduction in renters.

negative gearing could easily be removed on existing housing, and simply given (or even expanded) to say 10yrs on a new construction to stimulate demand for rental construction.

currently negative gearing simply allows boomers to snatch houses from under the noses of new buyers because theyve managed to save up some equity. buyers that are now forced to become renters because they have pushed the price up out of reach.

the last time negative gearing was removed, the pollies panicked and restored it before the market had a chance to react to rising rents (making rentals an attractive investment) by building more rentals and restoring supply/demand.

Coogera:

09 May 2013 3:13:57pm

crow:

There is likely to be in the short term after the cessation of negative gearing, an extra supply of housing which will drive prices down. That in turn along with investor disinterest will result in less building activity causing the supply to gradually dwindle and hence higher prices returning. Meanwhile, while all this is going on, there will be many people who, despite reduced prices will have no hope of buying a property. They will be the ones to suffer as the supply of rental property dries up.

Craig of North Brisbane:

09 May 2013 10:17:30am

I don't understand this objection. The removal of negative gearing will not cause these houses to simply vanish. The decline in the number of properties available for rent would be offset by the increase in the number of people able to afford to purchase their own homes and not need to rent.

gargamel:

This is what those that take advantage of the tax break will always say, please show us the maths.

If you remove negative gearing, you reduce demand for those properties (ones often left vacant for part of the year).

- as a result, you ultimately drive down prices- as a result, you allow some of those renters entry into the market- as a result, you have less people out there renting, reducing rents

however, you also devalue the one asset most people choose to own (and in some cases they end up owing more than they're worth). this is a disaster for any politician/gov't and the very reason they will never have the balls do it.

- negative gearing should be limited in the very least (immediately to maybe one property)- negative gearing should be phased out over a 10 year period to allow prices to adjust without bankrupting people who did it with the understanding the current policy (favouring the better off) would be around for a while

making money out of others (in)security (we're talking families with children who cannot afford to buy, rent and have continuity to support education and employment) is both greedy and lazy. put your money into something more productive.

Aussie Sutra:

09 May 2013 10:55:48am

Australia has a housing glut. The removal of negative gearing would flood the house market with houses which would bring down house prices meaning that more people would be able to buy and not rent. The overall number of houses would remain THE SAME. So, no, there would still be plenty of houses to rent, and indeed, since so many houses are not even being rented out in the hopes of capital gains, it's more likely we would see greater availability in the rental market as well in the houses for sale market, and just perhaps, ordinary people would be able to afford to buy and OWN a home once more.

JoeBloggs:

"scrapping the negative gearing provisions" - why? we allow every other business model to deduct expenses from the income of the business and offset any resulting losses from any other taxable income. Why should individuals how own rental properties be singled out? Will you also scrap negative gearing on commercial rentals owned by individuals? how about a small business that is making a loss? how about a large business making a loss?

Boingboing:

samehere:

08 May 2013 4:47:42pm

you've basically just described our problem here in Brisbane. We could comfortably afford a house in Ipswich, but the daily commute would kill any joy we'd get from owning our own backyard. The suburbs in Brisbane we could afford (less comfortably) have no train line and the city council is cutting bus lines as we speak ... sigh

I know other people are doing it, but we lived in London for a while and did the whole 1h+ commute and for us as a family it wasn't working. However, I am not sitting here lamenting the fact that we can't buy a house, I am more resigned to it really. Still, we are saving and maybe in a few years time we are in a different position.

crow:

09 May 2013 9:52:02am

funny how you conservatives would call that corporate welfare when its for companies like Holdens to sustain jobs, but when its Govt handouts to help you featherbed your retirement its great for the economy.

removal of negative gearing on existing properties would drive the price down on housing too, making them reachable again for first home buyers. negative gearing could be shifted to new construction only, meaning more rentals are created, rather than the current system that simply rewards boomers who have equity in their current homes to outbid the next generation home buyers. which is probably why boomers love it so much I guess, but its not a sustainable nor very efficient method of spending taxdollars.

Budovski:

09 May 2013 3:10:23pm

Crow you are 100% correct. Why make people who speculate on existing housing be income tax exempt? Why should these people who contribute pretty much ZERO tax to the public purse purely for enriching themselves at a very large long term economic cost to everyone else be given welfare to the tune of 12 billion a year? Negative gearing of existing housing stock an offensive distortion of the market. It should be removed along with the FHOG and stamp duty for first home buyers.

Aussie Sutra:

09 May 2013 10:59:54am

We don't owe the building industry the right to build ever more dog boxes on the outskirts of large cities. The cheese has moved for lots of us over the decades and we've had to get on with our lives, so can the building industry. Without negative gearing there would be no fewer houses in existence than there are TODAY and house prices would come down. There would be plenty of rentail accommodation, moreso than now, and we have about 90% of our entire national output tied up in housing now, which needs to be stopped, so let's stop people from "investing" in property altogether and penalise those who do so. Time for people to get back to living life instead of "investing" in ponzi schemes.

Budovski:

09 May 2013 1:06:49pm

1. "A shortage of rental properties" This is a myth. A large portion of people renting do so because housing ownership is unaffordable. An increase in properties for sale at cheaper prices would bring down the number of people seeking to rent. Add to that the added economic benefits of increasing the spending power through reduced housing prices. The debt industry is actually destroying the national economy.

2. "A reduction of investment in Australian property." Why do we need to be selling our property off to Chinese investors at the social cost of annihilating a generation of people with debt? Its a strategy for national suicide.

3. "A decline in the building industry". Theres no evidence for this. If we destroyed the artificial housing shortage the only industries that will lose out are banks and developers. There will still be increasing building demand deliberately managed population increase.

All your points are simple fear mongering to sustain a housing bubble that costs taxpayers $12 billion + a year and the domestic economy about $55 billion a year all for the benefit of housing speculators (many of which are foreign nationals).

JoeBloggs:

09 May 2013 9:10:45am

1. The rules allowing a loss generated by a negative gearing (term used loosely) are applicable to every single business model. Why single out individuals who own residential rentals? (ps. as soon as you do people will just use a different type of entity to bypass the rules relating to disallowing individuals to offset investment losses against other taxable income).

2. Scrap the entire capital gains tax. If a person/entity is in the business of making a capital profit then tax them via the income tax system. If they just happen to own an appreciating asset then that appreciation is largely just an artifact of inflation, no real profit in real terms is ever made.

3. Where do you think superannuation monies end up being invested? Property.

taxedorff:

08 May 2013 4:50:06pm

the problems of homeownership partly driven by allowing foreign ownership of houses which in turn helps to escalate the surrounding house prices , the ridiculous building of oversized houses for smaller sized families which keeps the prices of homes way overpriced coupled with the building of energy inefficient buildings which then cost more to run and maintain. aust has a low birth rate but a large immigration program which is not satiated with a home building program. yes have migration but also have the houses ready and the infrastructure in place to direct the migrants to work in key areas that require the workforce.

Wickerman:

08 May 2013 4:54:48pm

Oh call the whaaaambulance. Home ownership is possible, it called saving money & not having high spending habits and expectations. As a Gen Xer in a DINK relationship, we managed to get a deposit on a modest condition apartment in Sydney's north shore in late 2000. Two years ago we paid the mortgage off. No big trips, no big expense items, got a 10+ yr old 2nd hand car etc.

It is possible, just lower your expectations.

"Roy Morgan Research says more members of Gen Y are renting than ever, fewer have mortgages, and more are have travelled overseas in the past 12 months than ever before."Perhaps they should put the money into a savings account for the deposit rather than overseas trips - duh.

"Many members of Gen Y see owning a home or apartment as a sign they'll be tied down and a slave to their jobs."Oh the poor little dears - call the UN. The environment where we are slaves to the grind/working for the man is called the real world.

If housing is so unaffordable, then why is there still sales happening? ie clearance rates. The people buying must have access to cash/loans to make the purchases.

Housing un-affordability in my mind is mainly (but not exclusive) due to:State stamp duties -these prevent mobilityCashed up immigrants - not the refugee, more the cashed up Chinese/UK/North AmericaWhiney people with no saving ethos Negative gearing - properties being puchased for investment not for living

JoeBloggs:

09 May 2013 9:16:59am

Spot on Wickerman.

It is the lifestyle choice people make that preclude them from owning a house, nothing else.

Excuses usually come down to:

- oh i don't like that neighbourhood, it may be affordable but it is beneth me.- oh but i like going on overseas trips.- oh but i like going to restaurants and/or eating expensive foods and luxury items.- oh but i just need those new shoes/pants/sunglasses.- oh i need an updated car.- etc

We came to Australia with nothing, within 4 years we had saved for a house and purchases one. Yeah it's not the flashest house in town, but it is ours.

Housing is actually incredibly affordable (particularly in relation to the average wages) here in Australia. Most people haven't seen how brown the grass is over the fence though so don't realise this.

Bob:

I've always figured everything in life is about sacrifice. If you want to get a home earlier, you might have to sacrifice that yearly holiday, daily latte, $100 weekend binges, etc.

In some cases, even entering a higher-paid career you don't necessarily like (ie. engineering, medicine, trades). Or not buying a home until you get married. Or living with housemates. Everything in life is about sacrificing something.

Yes house prices are more expensive today, but then again, that's always been the case since the founding of Australia. It's a far cry from the government giving away land for a few bucks to anyone interested in settling.

R. Ambrose Raven:

As always, a nice story carefully written to put all the blame on the buyers, completely exonerating Big Property and all the other vested interests.

Forgotten that 75% of 35-year-olds can't afford a mortgage, or that 22% of Sydneysiders own 55% of homes?

Or land-banking? Lend Lease is sitting on 33 years' supply to keep the price high - good business practice is it not?

Also what, pray tell, do those borrowers do if interest rates double, or they become long-term unemployed (or just as bad, marginalised) because our good-job-creating industries have been destroyed by a lack of government support combined with foreign countries' currency wars?

Crow:

2000 you say? you mean just before house prices doubled and in some places tripled?

wow arent you the smart investor. everyone should be like you and buy just before a massive boom that pushed prices out of reach.

I bought my house in 1997 for $97,000. today its worth over $650,000. heres the kicker. even now that Im married and on joint income and several promotions since then, I couldnt AFFORD to buy my house today given the price. so unlike you I dont consider myself so superior to everyone else for being lucky enough to buy when houses were still affordable

Skeptic:

08 May 2013 5:01:38pm

I own a couple of investment properties. Now before anyone jump on me about all the fringe benefits by owning properties, save your breath. Everything you are going to say is probably right. However, such people seldom bother to dig deeper.

I took the plunge when interest rate was at 13.5%. My salary for an engineer was much lower than what is the norm now. It took self-disciplines, commitments, and above all, being able to take a long-term view of your own financial well-being.

It was constantly hammered into my head by my parents not to ever get into debt as our family was always scrapping the bottom of the barrel. Then I realised that there are "good debts" and there are "bad" ones. A good debt is one you will, if you did your homework, make you a little richer in future. I am talking about loans for a property which, hopefully, will appreciate in value as time progresses. A bad debt, is the opposite. To borrow to buy a new car, an overseas holiday, are a fun way to live your life. It will give you a sugar rush, but all you are doing is making salesmen richer so that they can buy their own properties !

I know of a young surveyor who is on a good salary. He is struggling to pay off a $150,000 home loan. He spends, more like wasted in my opinion, $40 a day on tobacco and alcohol. On top of that, he is paying off his credit card loan at 19% interest for brand new furniture worth $15,000. Why not second hand ones, I asked. Because new one looks better in his first home. That is what I meant by "bad loan".

Please don't forget to mention the new migrants too. I so happen to have a young migrant family in one of my properties. They nearly defaulted due to job loss, and the agent was going to chuck them out on the street. I intervened and allowed them more time to sort it out, and they had. They are not going to be able to buy their own home, not close to the cities anyway.

Blzbob:

08 May 2013 8:33:52pm

You have the right idea skeptic, but I think one investment property is enough, providing you also own your own home.One thing that is pushing house prices so high is those who own multiple investment properties and still just want more.

I would also like to see them scrap rent assistance.What they should be assisting is for people to take the plunge into buying their own homes to give them the pride and intensive to make much more effort. It could be done by subsidising interest rates rather than subsidising landlords.

R. Ambrose Raven:

09 May 2013 11:40:51am

why reward profit-seekers for exploiting renters who've made a commitment?

You know perfectly well that in the first decade or so of a housing loan almost all the mortgage payment comprises interest. As the average person sells and moves at about seven years, that is effectively dead money - just like rent! If there is no real increase in property values, the substantial costs of moving need to be added to the next mortgage.

why do renters have to make a commitment? Note how quickly the supposedly supreme capitalist concept of consumer sovereignty is wiped like a dirty rag once it gets in the way of profit-seeker greed and arrogance.

Devil's Advocate:

08 May 2013 5:02:32pm

There has always been many people in Australia for whom home ownership was never a reality. Home ownership isn't a birthright, especially in your preferred suburb. I can't help but feel the affordability crisis is a little overstated. Sure, you need two incomes nowadays, but if you're prepared to make compromises, it's achievable for most. My partner and I make around the national average household wage, saved hard while renting for a 10% deposit on a $400,000 house. Our search for the right house took us further out than we preferred, but we are in an established eastern suburb with great services in lovely little home on a big block, have two young children and are comfortable and happy. My partner has a 1hr PT commute and sometimes we feel a bit far from our friends but that's the compromise we had to make to get our foot in the door. If we didn't we'd still be paying someone else's mortgage. In 10-15 yrs we'll have the choice to move into something even better and closer to the city if we desire. It's all hard work but prices are out of our control. Rather than complain about it or wait for years for prices to maybe go down or for that inner-city bargain that doesn't exist, we chose to take the bull by the horns and got on with it, and we don't regret it one bit. Don't give up!

Skeptic:

When I was searching for my first home to buy, I was shown properties in various locations. I wanted to get a broad overview of what, where and how much they were.

I was taken to areas close to Perth itself but within the 10-15 Km radius, as well as some suburbs some 5 Km further away from it. These locations were much cheaper and, judging by the common perceptions, down market because of the high number of lower income occupants. I actually formed a negative opinion myself when I saw there were cars with their bonnets up, wheels resting on bricks. I did not want to take the risks and bought mine in areas closer to Perth.

My properties had gone up just like most properties in WA. However, interesting enough, the outer suburbs which I was reluctant to dip my toes in, are now considered the "hot spots". As demands for properties near Perth soared, and supplies dried up, those less "desirable" suburbs are now overtaking mine in terms of percentage of growth in value ! People with cars on bricks are now forced out. Capitalism is working in its own mysterious ways.

Please don't forget that transports and services will eventually move to these places as they grow.

Act Rationally:

08 May 2013 5:22:08pm

Get rid of negative gearing for anything other than newly constructed properties. Easy.

Oh guess what? An investor might have to sell then. And someone who was previously renting can now move into that house. Nil sum game. Financial planners and accountants have been using the losses incurred in rental income vs loan repayments against primary income for ages and the taxpayer foots the bill. If you can't make an investment make you money without being able to offset against your primary income, not the taxpayers problem. As I said before, somebody will move into that house rather than rent.

New houses then fine - you are INCREASING the rental pool. But buying an existing property and hence denying someone the opportunity to buy to live there? Do it on your own dime. Shares and other investments are different - people LIVE in houses.

Gresley:

09 May 2013 1:48:29am

Agree that negative gearing should be restricted to new dwelling built for investment purposes. Allowing negative gearing on existing dwellings does not lead to the creation of new housing stock and simply leads to investors and would be owner-occupies competing for existing dwellings driving up the price. Also the first home owners grant should be phased out as it simply leads to an increase in demand for housing with no increase in supply leading to inflated real estate prices. This makes housing for FHB less affordable. It only benefits existing home owners and builder -not FHB.

Measures that simply increase demand without stimulating supply make housing less affordable for FHB's.

JoeBloggs:

09 May 2013 10:25:26am

Gresley,

I wish to provide for my own retirement, to do that I need to try to make money.

As such say I decide to invest in an investment ie. shares. I borrow money from the bank to buy the investment with the hope that I will make a profit when I sell the investment. In the mean time I hope that the regular income returns (ie. dividends) will help offset or defray the cost of owning the investment (ie. loan interest & operating costs), as the annual costs (ie. interest) exceed the regular income returns (ie. dividends) I am allowed to offset the loss against my other taxable income in my tax return. When the investment is sold I will pay a capital gains tax (discounted or otherwise).

Now... lets for a moment assume I am risk adverse and find the risk factor of shares to much and as such instead invest in property which is less risky in the short and medium term. Say I decide to invest in a commercial rental property the same rules relating to investing in shares apply.

Say I instead decide to invest in a residential rental property, the same rules apply.

Why should a person who wishes to invest in residential rental properties be singled out and punished because they are risk adverse while they try to provide for their own retirement?

If you have a problem with the equilbrium price of residential property why target the demand curve? why not target the supply curve? why not suggest that more land be released, this alone will bring down the price of residential properties.

Yes you will destroy the retirement savings of hundreds of thousands of Australians and cause them to become a greater burden on the taxpayer in their retirement, but that is ok as you are only interested in yourself right?

And now you have your own home what will you do to provide for your retirement? will you invest in shares? or are you risk adverse and want to invest in residential property?

JoeBloggs:

09 May 2013 9:28:37am

If you intend to disallow the mortgage interest on residential rental properties for being a deductible expense, will you still allow rates, water, agents fees, body corporate, repairs, depreciation, captial works deductions, insurance, travel costs?

Do you intend to allow these losses generated each year to be carry forward (instead of being utilised each year) and be used to offset any future capital gains on the property? If so the net effect is equal and it is purely a timing difference.

Will you disallow a company, super fund or a trust that owns residential rental properties from being able to claim any losses against other income?

Will you disallow losses on commercial rental properties own by individuals/companies/super funds/trusts?

Will you disallow losses generated by other investment activities?

If you only intend to allow losses generated from negatively geared new builds will you allow those provisions to also incorporate a situation where the property transfers from one entity to another within the a related group? ie. a transfer of owners due to divorce? how about a transfer of the property to a SMSF, family trust or 100% owned Pty Ltd? is so then you are effectively allowing negative gearing for existing rentals, if not then you are simply punishing people for structuring their financial affairs in the most effective and appropriate manner.

M.Asher:

08 May 2013 5:35:09pm

Unfortunately this one really is the governments fault. Construction costs for apartments with humble fittings can be kept lower than $200 000 (see quotes from http://www.washingtonbrown.com.au/building-cost-calculator/ ) but average the apartment in a capital city costs more than twice that. The other costs (land value, finance, taxes) are largely controlled by governments; how much land they rezone, how quickly they approve plans, and how much they demand in tax.

A happy little debunker:

08 May 2013 5:35:53pm

Twice in my life (up til my 40's) had I saved enough to make a deposit on a property. Twice, through no fault of my own, I found myself unemployed and was required to use these savings because the government would not help until I was bankrupted.

When I eventually was able to mortgage a home, I found the government housing bonus would not apply to me, because my deceased father had left me a 1/4 share in a corrugated tin shack (nominal value - nil).

So my choices of buying were limited.

Further limited by my meagre income, limited to the lifestyle I wanted and locations I wanted.

Yet, I can afford to buy and live less than 50 metres from a swimmin beach, 250 metres from a boat ramp, 1 kilometre from a freshwater river, 3 kilometres from a surfing beach, 30 Kilometres from work, paying down a 30 year mortgage within 8 years and living the happily ever after.

R. Ambrose Raven:

09 May 2013 11:46:48am

So you won't mind providing the numbers to give credibility to your fairy-tale, then explain how the average metropolitan worker (70% of all those in WA) can also enjoy this rags-to-riches success story? An industry troll could not have written a better advertisement for Big Property's interests. You are, after all, anonymous.

Patty:

08 May 2013 5:40:51pm

Dear Amy - a 1 hour commute to work? Luxury! Many face a much longer commute than this each day. High prices for inner city/inner suburb living are nothing new. Back in the 80's a number of our friends were renting out rooms in inner suburban houses they were buying so they could afford the mortgage. We moved to a regional area at that time to afford our first home and commuted to work.

the yank:

SilentViolent:

08 May 2013 5:49:03pm

Until there's more jobs in urban/rural areas, there will be this constant problem of the majority wanting to live in the same small area.

I've come to accept that I'll never own my own place. I'm not happy about it but that's the reality of my own circumstances (1 income, 3 dependents). I'm hoping the NBN will allow telecommuting which will be a big game-changer for a lot of people.

mark a:

08 May 2013 5:55:59pm

Move to a semi rural area and make transport infrastructure a political issue.We need high speed rail yesterday if we want to help solve this problem.House size is another problem.1973 average house size=100m2 2013 average house size 220m2.Costs in 1973 one t.v one wall aircon and we grew our own fruit and veg which =cheaper shoping bill.Cost in 2013 3tvs ducted climate control air con and the home theatre room e.t.c.A lifestyle change don't be greedy.

Ralph:

08 May 2013 5:57:00pm

One reason for the high cost of housing is speculators and investors buying up cheapish housing and land.Land is rationed out anyway as we do not have a lot of it in this little country of ours.When I was young my parents bought their house and were able to write off a percentage of the interest in tax. Now you can only do it if it is for investment purposes.If there is indeed a housing shortage (and there is) the stocks should be built and owned by government bodies and not private enterprise. It eventually gets paid by the government as a tax dodge anywayI believe negative gearing should be abolished. To live in Sydney and use a property inspection of a Townsville property as a tax deductable (holiday) expense when you have a local (in town) agent managing the property is legalised tax fraud.

Lopez:

08 May 2013 6:13:03pm

We need to look at overhauling the planning approvals process.

Local councils usually act in the interests of existing rate payers and local amenity with no regard for a cities overall housing needs or housing affordability. We need to accept higher densities as our population grows. This is rarely considered by councils in my experience. Perhaps the councils role in the approvals process should be made less pivotal.

The only way to towards lower real prices in the long term is by increasing supply- easier planning approvals, less red tape, less green tape and importantly- building standards that consider low costs as a priority.

NotMyName:

08 May 2013 6:14:19pm

How about the failure of the five billion a year tax funded speculation of negative gearing. Negative gearing was all, all politicians? of all parties could con Australians? into believing it would deliver plenty of rental or homes to buy, what a lazy bunch and what a con. It was obvious over two decades ago that all the tax funded speculation of negative gearing would do was to send the cost for Australian families paying a mortgage or rent to the criminal highs of today. Those using negative gearing to buy multiple homes didn?t care they were forcing the price of buying or renting a home for young Australian families, they were sure the continuing skyrocketing value in their property would give them a great profit. The politicians? consider buying multiple homes to be in the same class as those gambling on the stock market, what bankrupt morals to allow tax funded speculation of negative gearing to be just, necessary and correct. Judging ones wealth by the over value of a home is dishonest, most people who have paid off their mortgage would have to take out a bigger mortgage than the one they took out on their first home to buy another home, even if they downsized, the home buying market is corrupt and should have tighter more transparent regulations, the cost of a unit in a cramped industrial location is close to the cost of most homes. We are going to have to pay more taxes in the future, let?s get the curse of negative gearing off our backs; a drop in the value of homes will be cheaper for all in the long run.

Peter the Lawyer:

09 May 2013 9:00:51am

You really don't understand the tax system do you?

Negative gearing is not a concession, it is a function of how the tax law works. If you incur outgoings to make income, then those outgoings are deductible. The fact that the outgoings sometimes outstrip the income is immaterial.

The whole point of tax is not that the money belongs to the Government and they let you keep some of it; it is that it is your money and the Government takes some of it.

taxedorff:

09 May 2013 10:11:15am

hmmmm seems the infrastructure around the nation etc etc is all arrived at by magic. the tax system isn't the govt take your money its a case that taxes pay for things in your everyday life...but if you don't like all the services goodies then a plane ticket to some non taxing third world country awaits.

JoeBloggs:

I find it amazing how some people want to structure a tax system that is supposed to be fair, equal and equitable to be one that punishes particular investments or business.

And of course the work arounds of any abolishment of negative gearing deductibility on residential rentals is very simple. It may cost a couple of grand to alter the familys financial structure but it will in essence allow the negative gearing provisions to continue via an altered structure.

NotMyName:

09 May 2013 11:12:01am

Hello Peter the Lawyer you obviously don?t understand what my point is, five billion dollars of tax funded speculation sent the cost of Australian families buying or renting a home to the present criminal highs. As for tax, you kid yourself if you think the money you earn in any country is all yours; the French nobles with a population of fifteen million collected more taxes from their subjects than the Norman rulers in the UK could out of a smaller population, the French used these taxes to sling the nobles in the UK out of France. The lesson learned all governments since raise taxes to promote their version of their ideology and to keep themselves in government. Get ready for increases in taxes, and let?s hope the high earner handouts of Superannuation and others are stopped, but as this will also affect the politicians? I wont be holding my breath.

JoeBloggs:

09 May 2013 9:39:15am

As soon as provisions allowing losses generated through the ownership of negatively geared assets to be offset against other taxable income are abolished the entire construction sector would collapse causing massive unemployment, job losses will have a flow on effect on reduced retail spending, high claims of benefits upon the government, mortgage defaults (can't pay the mortage without a job), and a general slow down of the economy.

Do you also intend to disallow a person from borrowing money to buy shares with a view to realising a profit on those shares? It is an investment (just like a residential rental property), it will generate a loss initially until a profit is realised upon sale, currently that losses is deductible against other taxable income. It is also called negative gearing. Or do you intend to target share traders as well as individual residential property owners? Is there anyone else you want to target.

ps. It will be a very simple process to restructure your financial affairs so that you will in reality still be able to offset income against your investment losses if "negative gearing" allowance provisions are abolished. The cost would be modest and affordable as well.

Chris:

08 May 2013 6:15:51pm

Your obvious preference for getting more people to live in regional areas has blinded you to the obvious solution that is used in most other countries, just doesn't seem to be possible in Australia. And that is more high density housing which keeps getting knocked back by local government planning restrictions.

Arrow:

Land costs are kept artificially high because state governments release land to a handful of big developers, who then hoard the vacant land and drip-feed it into the market to keep prices sky-high.

It's a stitch-up, and governments are complicit because they are hooked on the income from high stamp duties.

The solution is to penalise holders of vacant land (and vacant houses) with a big land tax. This will stop the hoarding and get the cost of land down. It will also give governments a better income stream, so they can cut their addiction to stamp duty - making houses more affordable still.

Steve in outer Perth:

08 May 2013 6:25:48pm

There should be incentives for first home buyers with reduced interest rates for longer periods or opportunities such as no deposit loans. When you lock into a thirty year contract there has to be some assistance given? Your home should be a long term asset and not a prison sentence.

Lena:

08 May 2013 6:30:40pm

What about Gen X? I can't see how we will ever own our own home. For example, as a divorcee, my previous home ownership disqualifies both of us from the first home owner's grant. This is despite my partner having never owned any property and my half of the proceeds from the house being barely enough for basic furniture, let alone a deposit on a new home. We can just find the money to raise our children, there is nothing left over to save for a deposit.With regard to alternatives to Melbourne, the main brick wall we hit when moving to regional Victoria, was lack of childcare. Also! the cost of living might be a little lower (everything is closer, so commuting to work costs less), but surprisingly, rent and house prices in the regional centres (e.g. Warrnambool), are actually comparable with many Melbourne suburbs. Then you have to consider the three hour trip to the airport, or specialist healthcare... A lot more infrastructure and services are needed before regional Victoria becomes a viable alternative.

JoeBloggs:

Lena:

09 May 2013 2:36:45pm

Joe Bloggs, I suspect you would be about as wrong as Pluto is from the Sun...I was merely pointing out that there is no airport that caters for interstate flights in the whole of SW Vic. It is assumed that people are happy to travel 3-4 hours to access major infrastructure such as specialist medical care, interstate or international travel. Until regional centres start to have this kind of infrastructure, they cannot begin to be a viable alternative for many people. I notice that I'm not the only person unhappy with Melbournecentricity!

Louise:

08 May 2013 6:39:21pm

There are many options for tinkering with the housing market, most of them centred around tax changes. But the main issue is supply. We fix it by increasing supply every way we can - land release, urban infill, well-built high density housing, fringe housing supported by good public transport.

JohnM:

08 May 2013 6:39:21pm

"I'd live in regional Victoria in a heartbeat if I could commute to work on a high-speed train."

LOL. That highlights the problem rather than be a solution.

Why should you have to commute to Melbourne? The solution is to spread industry and employment around the state. There's no reason why office-based employment can't be spread around the state's regional centres. And when you start to get the people out of Melbourne other trades will follow too.

Victoria is far too Melbourne-centric. Over 4 million people live in Melbourne, which is probably as much or more than in the rest of the state. This is dumb.

In contrast, Switzerland (pop 10 million) has several cities of roughly equal size and some form of mass employment in almost every town. This is one reason why its intercity transport is so good, and why unless by choice people don't live more than an hour from work.

Louise:

08 May 2013 6:39:22pm

There are many options for tinkering with the housing market, most of them centred around tax changes. But the main issue is supply. We fix it by increasing supply every way we can - land release, urban infill, well-built high density housing, fringe housing supported by good public transport.

steve c:

08 May 2013 6:40:31pm

to buy my first home we didn't take holidays, we didn't have the latest phone, we didn't have a flash car ,we didn't dress in the latest fashions, we didn't eat out or go to the cinema, we prioritised our future and home, if you want to own your home you make sacrifices and PRIORITIZE IT. it is not going to be handed to you, and most boomers are happy to spend up rather than leave it to the lazy fashion,phone,spend it generation. we now own our home and still spend on it, it's our security, and not having a mortgage really makes a difference, we sacrificed and worked hard for it, if you want it you must earn it.we paid it all of by the time we we're 40, but both of us worked hard and only took 1 holiday overseas once we had paid it off, and still don't have a flash phone, time to decide what you really want, the best flash phone.... or a home forever?

JoeBloggs:

Like you steve we made a lifestyle choice to own a home instead of enjoying lifes luxuries.

Having come to Australia I have to say this is the nation of "milk and honey". We came with nothing and within 4 years we own our own home.

We just made decisions that allowed us to do that, a cheap 20+ year old car, mince instead of eye fillet steak, rice & veges at home instead of restaraunts, no grog, walks along the coast instead of partying in town, no o/seas travel, etc.

And we are on modest incomes around the average wage.

oh yeah, we bought in a cheap area too......

It is rather easy to own a home here compared to anyother place in the world I have lived.

Julian Edgar:

08 May 2013 6:41:44pm

Don't be wedded to your job, then it's easy to find cheap housing outside of capitals. If your starting point is that you need to work where lots of other people work, then it's going to be difficult. But for 99 per cent of people, that's actually an invalid premise.

seana:

08 May 2013 6:41:44pm

Jobs and infrastructure are centralised in Australian cities which also happen to be on the coast. The colony never managed to get off the beaches. Result? Overcrowded cities that are increasingly unaffordable, unpleasant and unhealthy places to live. The problem does not just reflect a generational divide. It is a city/regional/rural divide that suckes life out of the country as it plunges city dwellers into housing poverty.

I moved from the city as a working baby boomer to live in the country. I could no longer afford the rent in the city. I have had to remake myself all my life to stay afloat, including international and interstate stints. The generational divide is far less obvious, or bitter, out here in the country.

Exodon:

08 May 2013 6:44:04pm

This for me is one of the biggest challenges facing the y generation. The average age of someone in Australia buying their first home is an absolute disgrace. In Sydney it's 38 to 40. I live in Canberra ACT which has the second highest cost of real estate in Australia. The median house price is well over $500,000. This is largely due to Canberra's high employment rate and high average family income. However there are a number of policies and taxes that compound to extend housing out of reach of first home buyers.

Stamp duty is an inefficient tax that increases the cost of buying a home substantially. The Henry tax review recommended abolishing it. This is no easy measure as it's a large source of revenue for the states. Governments also are reluctant to release more land for development as the infrastructure costs are excessive. All these factors compound to make housing unaffordable. In the past people moved to find places to live but this is much harder today as most work is in the cities.

The greater societal impact of this in my view is quite severe. Young people live with their parents for longer in abject misery or are subject to renting for the rest of their lives creating instability and uncertainty over their future. The housing affordability crisis has become so bad that it has also created a rental affordability crisis with rental costs similar to that of a mortgage. It places downward pressure on population growth and denies young people the ability to have families. The end outcome is resentment and hopelessness. Yes you have to work hard and start out small as the baby boomers did. The difference was the hard work and sacrifice allowed you to get houses whereas today housing is so expensive it's unachievable. In the ACT increasing numbers of young people are organising groups as large as nine people, whom are all strangers, to rent the one property as it?s the only way they can afford to put a roof over their heads. This is no way to live and only serves to feed the growing mental health crisis in young people.

More people need to make this a political issue. Government already understands this to be a problem but the more people we get proclaiming injustice the faster government will act.

SilentViolent:

09 May 2013 11:51:59am

Well said.

Unfortunately for the career politician it's about votes and not jeopardising them at their own expense. Guess who has the most votes? Baby boomers and home owners. There won't be any change while millions of votes are at stake.

Could get interesting when the paper-rich owners try to sell their housing but can't get the price they want because no one can afford it..

Phillip:

Dean:

09 May 2013 1:42:27am

I saved in Australia while renting and am about to buy in the UK (in London) with my partner where the mortgage costs are less than rental costs.

We'll probably have a little less disposable income, but we'll live in a middle suburb of London half an hour from work via about 10 different possible PT routes rather than an outer suburb of Melbourne with 1 unreliable route to/from work.

I'd work from home if I could, but in my job that's not really possible. Although it's more possible here than in Australia.

JoeBloggs:

harvey:

08 May 2013 7:07:15pm

Even harder when you have kids to live in the outer suburbs, what with childcare, sport, music lessons etc etc.We waited until the kids grew up. Not that its much cheaper where we are, 80km from work.Maybe the NBN will help solve some of this problem with household videoconferencing becoming a reality. Then people might be able to claim a bit of their life back and be able to afford a house.

tomtoot:

08 May 2013 7:17:10pm

I probably fit the category of a baby boomer - the article is good and made me think a little of my own history when I bought my first home and I've often thought that buying today would be more demanding in some ways, but, in some ways very much easier than it was in the past.

In my exposure to the property market one was expected to have a deposit of 25% of the purchase price and a suitable income to finance the loan at about 8% which was the norm and pretty consistant

Pre-GFC borrowing for a mortgage was elevated to around 125% rather than the 75% at which I borrowed.

Today we are at very low interest rates and these low rates I believe are going to continue for many years to come - and that is a good thing for a buyer - perhaps, not so good for an investor - and providing we continue with low unemployment (that depends on our governments policies or changes in policies more so than business) then, with stable employment, low interest rates, a reasonably secure employment base, then ownership is as good as it can get - and a pretty good time to save and buy a house.

Mycal:

In commenting I should first delcare my interest, I have investments in housing developer companies (not doing all that well with the down turn either).

But Amy, the issue is obvious from your article, there are several factors:

a) Provision of infrastructure, build it and they will come and it is a role for Government rather than loading it on to the developers. Having to provide roads, social amenities, town centres as part of evey estate development might save Government the expense but it sure adds to the cost of the homes in the estate. Infrastructure should also include decent comuter rail links.

b) Gen Y may be renting in larger numbers than previous generations but I am willing to bet that income security and the casualisation of the work force has a lot to do with it. Mybe we need a tax on employers based on the proportion of their workforce that is casual?

c) Government charges.

d) Freeing up of land for development.

e) A serious public housing program, with lots of flexibility as to the type and funding mechanisms (I don't know if Victoria still has it but it used to support people who wanted to build their own home with low interest long term loans and considered their labour as "equity" in the development).

But most of all, a co-ordinated approach for the elements that impact on the housing market and the development of houses!

Andrew:

08 May 2013 7:28:32pm

As someone who has recently taken on a mortgage you have my sympathies.

I'm not Gen Y but it took me and my wife many years before we could even afford the deposit. We very nearly gave the dream away. Part of the problem for us is that we choked at the prices being asked for houses that simply were not worth that much.

For my part I consider most houses (including our own) to be very overpriced, inflated way beyond their reasonable value by a market gone totally mad.

mitch:

08 May 2013 7:56:05pm

Amy - Ballarat is 1.20 from melbourne. Feel free to do doe work whilst on the train. We have great schools and no smog. Kyneton is even closer. Why not work from home some days in your profession? Good luck deciding.

Dean:

09 May 2013 1:48:11am

What's the cost of a yearly ticket over 10 years?

Do I still save, or would I have been better off buying within driving distance?

This shouldn't be the case, but it is. Rail travel should be subsidised as muchor more as road travel is for the benefits it provides. If they had decent, cheap express trains to Werribee, Gisbourne, Kyneton, Tooradin, housing would be a lot more affordable.

polony:

08 May 2013 8:07:28pm

1) Some young Australians consider our property prices rediculous and are familiar with foreign property market crashes. Hence, a lot of us are staying out of overpriced property markets until prices become more sensible. Although there are upside risks, the downside risks are much greater.

2) "It's such an unrealistic dream anyway that research suggests this demographic figures they should invest in life experiences instead."

I read this sentence three times before working out that 'demographic' is being used as a noun and not an adjective. Please use English grammar when writing in English.

PDP11:

Developers want to make a buck, big developers want to make big bucks. Subdividing farmland into housing estates or building multi-story apartment complexes deliver those big bucks.

State government sets the policy to deliver cheap housing to keep voters onside. Redevelopment of inner city areas is expensive. Subdividing farmland at the edge of cities delivers cheap land for housing.

Local government rubberstamps the developer's subdivisions.

First home buyers with families want cheap house/land packages and the distant subdivided farmland is on offer.

New housing estates are built without public transport as that is not the developer or local government responsibility.

donkey:

08 May 2013 8:46:58pm

Thats what happens when people are greedy 1 person owns 50 rental propertys hiking the rent up then if you are renting try bidding against this person who now wants 51 homes i think any one with more than 2 two rental propertys should be taxed taxed and taxed thus should fix both rental problems and affordability

David:

08 May 2013 9:57:32pm

I have always sought jobs that included accommodation as part of the package and banked the money saved. By the time I bought my first home I had over half of the asking price saved. Doing a few years out west or up north can pay dividends to those who are willing to leave the city for a few years.

Mahray:

08 May 2013 10:06:37pm

DINK, just Gen Y (bordering on Gen X). With our combined income, we can get a loan for a certain amount. Due to work commitments, we are limited in where we can buy, and quite simply there are extremely few properties that we could possibly afford.

So if we devote one income entirely to paying off the mortgage, we still can't find somewhere to buy. Our jobs aren't portable, we can't go regional.

Add in medical expenses approaching 10k in the last 6 months, and there's just no hope. Renting is the only option.

Azrael the Cat:

08 May 2013 10:37:47pm

Nobody wants to be the one who says that their generation had it easier.

But even back when the argument used to be between the older-end of the baby boomers and the younger end of the Gen-X's (as a 1978 baby who came of age during the grunge+cynicism 90s, I just scraped into that), there were already several economic studies comparing tax levels vs government services for both of those generations AND the post-WW2 generation at traditional 'life milestones'.

Even when you account for the economic burdens of WW2, that generation contributed more and received less than any generation since. The resource gap between private and public schools was only slightly less than it was for Gen X, they had the lowest apprenticeship and early-career salaries, and tertiary education was monumentally expensive.

Yet they paid higher levels of tax than any future generation, very little of which was 'targeted' at themselves. Their 'high-tax' society paid for the quality public schooling, national infrastructure investment and affordable higher education (first through massively expanding the scholarships available, later by making university free) that the baby-boomers received.

Tax levels started going consistently down once the oldest baby-boomers approached middle age - just as the WW2 generation were hitting the age where one becomes more reliant on government services such as healthcare, public transport and welfare. Conversely baby boomers were twice blessed - large government when they were young, and small government for most of their working life (thrice blessed now, given that Howard's conversion from economic liberal to 'large-government conservative' was continued by Rudd/Gillard, and will probably be continued by Abbott, as the boomers reach old age).

The boomers' low tax levels left Gen X with poorer public education and expensive HECS debts, whilst Howard's political conversion meant that greater public spending came back in vogue just when Gen X started earning enough money to be expected to pay for it.

None of this means that boomers didn't 'do it hard' - for one thing, technological advances need to be factored in. But their parents did it a lot harder, and gave a lot more back. Not that Gen X have a right to complain - many of us benefited (through no effort of our own) from a housing boom that started just after we got our low-interest mortgages, and which continued long enough that I and many others were able to borrow against the increased equity in our home to buy an investment property, until soaring rent meant that the 2nd property paid for both debts. Yes, everyone I knew who did that 'worked hard', but no harder than Gen Y are today.

I can't see a similar stroke of economic luck restoring intergenerational equity for Gen Y, like it did for my generation. And I'd rather pay higher taxes in the same way as the WW2 generation did, than be remembered as the genera

DAMO:

08 May 2013 11:12:06pm

Great points Amy.One of the solutions will be the expansion of the regional centres other than Geelong, Ballarat and Bendigo which have seen large expansions already.Western Victoria has Colac and Hamilton,all it needs is the policies to encourage people to move there.The abolition of negative gearing would also be a good start,but politicians are to scared of the backlash at the polls to tackle that one.I do see that in the future, with the advent of the technological revolution we are currently enjoying,more people working from home in jobs where they don't need to commute much at all.

Bill:

Breach of peace:

09 May 2013 7:17:10am

The problem is that there has been this long standing conspiracy between state governments and developers to keep a 'limited' amount of land on the market and to release it slowly to keep the prices up. Next we have this outrageous stamp duty that is simply criminal. There will be many people who will never be able to afford a house and that in return starts a chain reaction to rental properties to jack up the prices in rent for those who cannot afford to buy. This in turn will create shortages for people to live. It has been causing problems for several decades now and it will only get worse.

Pollyd:

09 May 2013 12:15:18pm

Joe Bloggs - who in this generation has even seen a silver platter?Why criticise Amy for having standards?So she doesn't want to waste her life/time commuting?Where's the platter in that one?It's a selected standard of living - it doesn't mean she's wearing a tiara and staring down her nose at the depressed looking commuters rolling out of public transport exits..

Peter the Lawyer:

09 May 2013 10:46:42am

PeterB

You were doing well until you talked about negative gearing being a market distortion. It sounds like you think that there is a special section in the tax legislation that allows people to cliam deductions of interest on rental properties. There isn't, it's just the way the tax law works. If you incur an outgoing related to earning income you get a deduction.

Removing the deduction for interest on rental property would be a didtortion of the tax system. You would be taxing different transactions in different ways and creating complexity that would cause no end of market distortion as people rushed to negatively gear shares or other assets instead of real property.

Keating tried it in the 80s. It lasted for a year before he had to reintroduce negative gearing deductions for real propoerty, because it completely ruined the rental market.

flynavy:

09 May 2013 9:26:45am

Public transport & transport infrastructure as a whole is the reason why people won't live regionally. That along with lack of job opportunities, lower wages etc. We moved to a regional area. House prices were comparable to some suburbs of our closest capital city however we moved here for employment so house price alone was not a factor. The average wage here is lower than the city wages so actual affordability is tough for many. This region relies heavily on development, tourism & hospitality. We both lost our jobs with our employers closing down due to the GFC & subsequent downturn. There are no job prospects for us here, so many companies haven't been able to hang on long enough. We are forced to work in the city. This area is just approx. 100kms from a capital city. Public transport travel time is 2hrs if you manage to catch "xpress" services. 2-3hrs if you catch regular services with transfers required too. Living regionally is fantastic if you have job security within your region. The day your job goes (we got 4weeks notice & have children in secondary school, mortgage etc) you're screwed. Unless of course you consider your 4-5hrs travelling time on top of your 8-9hr working day as normal living...we just can't do it any longer - it's affecting our family life, our health. We feel forced to rent out our family home & move to the city with the privilege of having to pay massive rent while trying to save extra$$$ all over again in order to one day buy a home in a capital city. If we had our time again - we'd never ever live regionally, just too much at stake when it all goes pear shaped.

Coogera:

09 May 2013 9:33:52am

The housing problem is linked to our inability to accept that increased demand for government services can only come with crippling taxation. So it is with housing. People have all kinds of expectations about housing that can only come as a set of direct and indirect costs.

Outer development in the large cities has reached its limits in respect to infrastructure development and practicality. Additional development in Sydney and Melbourne needs to concentrate on increasing density around existing transport/ shopping hubs. We can only expect to get improvements in public transport by increasing patronage and thus create viability in increasing services.

Demand for housing in Sydney and Melbourne will only keep increasing with migration. No one is going to a rural location - even if you can work from home, people like to be near the best schools and family. A housing solution can only come through strong political will and that of course is largely lacking in local councils.

vmon:

Am I the only one to notice that the phrase "household income" has replaced "income" in all these discussions? Have single/divorced folk suddenly become an unimportant demographic?

Occasionally I see reference to the insidious plight of female retirees with inadequate super, but that's about it.

In the space of less than twenty years, we've gone from mothers telling their daughters the princess fairytale to catch themselves "a good provider", to women finally becoming empowered by education & employment & the ability to get mortgages to make their own life, to mothers telling their daughters the important financial plan of catching "a co-mortgagee"

I am a (somewhat embittered) divorced male in my late fifties; compulsory super arrived just as I became self-employed. I spent years paying myself as little as possible to get my business going. I've got bugger-all super. In the 80s & 90s, renting while on a pension was not luxurious, but it wasn't deliberate punishment. Buying property was never trivial, but a house could be bought for three years salary, I was making better than average, and there were more important things to worry about.

Eventually, the ex-princess got the house. The high dollar destroyed the business. I work in a specialised freelance field that only exists in Sydney, I can't just move somewhere cheaper. Even on a good salary, I cannot sign a 25 year loan contract. I'm used to it, but it seems that half the workforce now has zero job security.

"Household income" means that a house now costs seven years salary. Rents have followed.

I had to move out of the tiny two bed house I was renting because of competition from yuppie couples. Then I had to move out of the one bed flat because of competition from yuppie couples. Now It's getting hard to find "studio apartments" because of competition from yuppie couples. My income has remained largely static for the last 10 years, but rent has more than tripled.

I'm sick of hearing about working families & the perks they feel entitled to. I'm just an old guy who had bad timing with his choices, but are we really looking at a society that is going to revolve around the importance of inheriting property wealth and basing marriages on investment advice?

MT_Syd:

09 May 2013 9:57:33am

Some interesting research in the US and Europe is suggesting that high levels of home ownership has a negative effect on employment. People are less willing and able to move, and are gradually forced to commute further. The overall effect is higher costs and less confidence for people wanting to set up businesses.

Maybe we ought to be aiming not to fix the ownership problem, but to create a decent rental market.

Von:

09 May 2013 9:58:07am

Amy,

There is no "root" cause analysis in your article. There is no analysis to why housing is unaffordable and no analysis to why infrastructure is inadequate. Fundamentally the driver of demand for dwellings (high prices) and lack of funds for infrastructure is caused by Australia's excessive population growth policies along with no "clear" Government budgeting for this growth.

In 2009 Curtin University completed a study into the cost of developing infrastructure in the inner and outer city areas. The cost was $127K and $263K respectively. In 2012 Australia population grew by 360,000 people. In the worst case this created a $98 billion back log in infrastructure just in one year. This is between 20% and 25% of all tax revenues by Fed and State Governments. Determining what Governments spend on new infrastructure is not easy but it seems to be about 50% of what is needed.

If one really wants to improve housing affordability and reverse the lack of infrastructure then stabilizing Australia's population will achieve this, ie reduce demand for housing and minimize demand for new infrastructure.

The first step to a solution is for Fed and State Government discuss population growth at COAG and to have a budget for population growth.

Tory Boy:

damon:

AdamC:

09 May 2013 10:36:56am

I think some of these articles overstate the problem. I am about the same age as this author (early thirties) and live in Melbourne. Most of my early Gen Y and late Gen X friends have either bought homes, or have no real intention to buy. At least not at the moment.

While housing has become more expensive, even as a multiple of income, our incomes are vastly higher than those of our parents' generation. Many late twenty and early thirtysomethings bitch about how expensive it is to buy homes, yet go out several nights a week, always meet friends for brunch and drive European sports cars. Those were luxuries to previous generations.

There are no doubt people who struggle in our society, but young(ish) couples who are too grand to live in Werribee are not among them.

rfb of brisbun:

09 May 2013 10:50:28am

Why not do what the yanks have done for years? Legislate that ALL superannuation funds must invest a set percentage of their funds into housing? Also legislate that the annual returns on investment cannot exceed the bank interest by 1%?

If a super fund elects to build houses they then sell them for bank interst plus 1% above the costs to build. If the super fund elects to build and then rent, the annual rental return is to be no higher than bank interst plus 1%.

This way trillions of dollars would be invested in new housing (at a reasonable cost) and the constant spiral of housing costs would almost stop over night. Plus rental costs would come down at the same time.

I am 66 years old and own my own house. Its obsene that my children cannot afford to buy a house when both of them work. My last house increased in value by 300% (no mistake - 3 times it original price) in 5 years -2001 to 2006. I bought a smaller residence for cash from the proceeds of the inflated price of my original house.

ronny of Brighton qld:

09 May 2013 10:52:16am

As a self funded retired veteran there is one question on house prices that are interestingWhen i bought my first block of land it cost me $2,000 (1971).I had built a 3B house $12,500.Total $14,500.If i built the same house today it would cost me $300,000 for the block and $150,000 for the house.AT this stage I was earning $250 a week.Wife and three kids.A trolley full of grocery's cost me $30I could buy a side of lamb for $15In 1984 I bought a house for $49,000 IR 18.2%This is when the glut started and if you think it is bad now just wait as land prices will dramatically spiral to dizzy heights.Good luck to all as the Bank Defaulters list is increasing every day.

R. Ambrose Raven:

09 May 2013 11:22:31am

Unaffordable housing is a big big social problem. Housing was turned into a financial instrument to allow the banksters of the 1980s and 1990s to get rich by leveraging the conservative pre-deregulation balance sheets. They've plundered, pillaged, looted, and gone, leaving us to carry the mess and Big Property to pretend it didn't happen.

While there are areas of housing shortage, overall the National Housing Supply Council's "180,000 dwelling shortage" is a lie intended to boost profit and extract wasteful public subsidy, eagerly propagated by a media that makes a lot of money from its Property liftout. It was a lie exposed by the data of the last Census, without any censure of the Housing Industry Supply Council committee members who signed off on the Report.

As with the superannuation tax concessions for wealthy working rent-seekers, government subsidies are doing far more harm than good.

All current policies encourage unaffordable housing.

Negative gearing encourages unaffordability by encouraging speculation in existing dwellings due to the expectation of capital gains.

First Home Vendor Grants harm affordability. Tax (or other) subsidies to the profit-seekers simply allow them to increase prices by an equal amount.

A vacant dwellings tax would both earn revenue and discourage capital-gain hoarding. Note that the 2006 census found that 10% of all dwellings were unoccupied. One cause is said to be Asian investors preferring to rely on capital gain rather than be bothered with rental income.

Profit-seeker plunder assists unaffordability.

Foreign investment encourages unaffordability. More seriously, it also removes the upper limit to housing unaffordability that would otherwise arise from locals' incapacity to pay more ? to the benefit of Big Property.

Land-banking by developers encourages unaffordability, since the aim is to hoard empty blocks to drive prices up. Lend Lease in mid-'12 released just 29 properties to market of 4900 releases.

Government housing policy has for a long time wrongly been to subsidise the provision of private rental and owner accommodation rather than fund a meaningful quantity of public housing. On the contrary, the provision of public housing should be a central role. Negative gearing should be abolished, with the savings being spent entirely on public housing.

R. Ambrose Raven:

09 May 2013 11:25:10am

Unaffordable housing is a big big social problem. Housing was turned into a financial instrument to allow the banksters of the 1980s and 1990s to get rich by leveraging the conservative pre-deregulation balance sheets. They've plundered, pillaged, looted, and gone, leaving us to carry the mess and Big Property to pretend it didn't happen.

While there are areas of housing shortage, overall the National Housing Supply Council's "180,000 dwelling shortage" is a lie intended to boost profit and extract wasteful public subsidy, eagerly propagated by a media that makes a lot of money from its Property liftout. It was a lie exposed by the data of the last Census, without any censure of the Housing Industry Supply Council committee members who signed off on the Report.

As with the superannuation tax concessions for wealthy working rent-seekers, government subsidies are doing far more harm than good.

All current policies encourage unaffordable housing.

Negative gearing encourages unaffordability by encouraging speculation in existing dwellings due to the expectation of capital gains.

First Home Vendor Grants harm affordability. Tax (or other) subsidies to the profit-seekers simply allow them to increase prices by an equal amount.

A vacant dwellings tax would both earn revenue and discourage capital-gain hoarding. Note that the 2006 census found that 10% of all dwellings were unoccupied. One cause is said to be Asian investors preferring to rely on capital gain rather than be bothered with rental income.

Profit-seeker plunder assists unaffordability.

Foreign investment encourages unaffordability. More seriously, it also removes the upper limit to housing unaffordability that would otherwise arise from locals' incapacity to pay more ? to the benefit of Big Property.

Land-banking by developers encourages unaffordability, since the aim is to hoard empty blocks to drive prices up. Lend Lease in mid-'12 released just 29 properties to market of 4900 releases.

Government housing policy has for a long time wrongly been to subsidise the provision of private rental and owner accommodation rather than fund a meaningful quantity of public housing. On the contrary, the provision of public housing should be a central role. Negative gearing should be abolished, with the savings being spent entirely on public housing.

ant:

09 May 2013 11:44:43am

Too many people competing for too little land and housing. Our population growth is unsustainable, and un-natural, we must bite this bullet and curb our growth.

Also, market-skewing factors are contributing to the housing bubble and chief among them in negative gearing on housing property. Abolishing that would remove many from the housing market, and return housing to what it should be: housing.

I'm almost 50 and didn't get into the property market before the massive price rises (early noughties from memory), so I'm priced out. I'm average income, but single, and owning a home is a distant dream for me, too. It does change how you think, I'm with the Gen Y folk on that one.

Pollyd:

09 May 2013 12:10:42pm

Great article! All food for thought - a few points to add though - regional living is no picnic - housing in any decent area is only affordable if you are in the traditional 'nuclear' partnership...wages for the average job cannot compare to city earnings and the scope for climbing that job ladder is only as tall as the proverbial footstool!It seems to be a compromise no matter where you live!Live the rural dream and make sure you're married up to make you more 'house-loan' friendly...knowing that you'll compromise on a more creative and rewarding job...Or live in the city and rent!

Stu:

One thing that has the potential to influence this is working remotely. The impact of remote working on mitigating some of the issues in this article seems to be missing from the NBN discussion.

I work remotely for a company where the staff are distributed in different cities, regional centers, and interstate. It works incredibly well for us due to a forward thinking owner with a strong technical background.

There are cultural adjustments. You need good technical solutions and management who gets the impact of remote working and the personality types required. Also, obviously, it is not feasible for some industries.

If it's done right then there is only the need for some job roles to occasionally commute or go on site with clients.

As a result I can live anywhere in a similar timezone with a fast reliable internet connection.

ardy:

What you all seem to be missing in this silly exercise of 'can Gen Y buy a house' is that they don't want one unless it is near new or in the inner city and is priced at about 100k.

They spend all their money on communications charges, smart clothes and cars. The biggie is being able to travel for a few months overseas every couple of years, or worse, like our boys, have American girlfriends.

They have lived a privileged life given too them by their boomer parents, and they are NOT going to step down from that level. That is why when the banks forclosed on mortgages from Gen Y who brought property in the first home owners grant, the cleaners of the property reported that every house had a new kitchen and bathroom paid for either on the mortgage, but mostly on a credit card, paid off by their parents no doubt.

Gen Y can go stuff themselves, they don't want to work for a property nor be sensible should they buy one.

M goes Viral:

Amy your article cites reasons for lowered home ownership of Gen Y, but then doesn't address as a cause of the Gen Y housing rates:

1. Money is spent travelling overseas - not on housing deposit2. Home ownership is believed to be an emcomberance3. Investment on life experience rather than tangible assets

How can any policy, Politician or planning mechanism address a preference?

Your conclusion of the crux of the problem is also incorrect.

Regional centres are cheaper because the commute to paid employment is difficult. Fast trains and commuter ease would make regional living a far more attractive option and once again lower incomes would be out competed.

NevinEsk:

09 May 2013 2:53:55pm

We have three pox on the Australian Dream. First is local governments charging too much to anyone wishing to develop land. Second is Developers withholding land until such time as demand increases and they make a healthy profit on sale and third is state governments charging Tax on the purchase of your property.

In the ideal scenario all land would be state owned and leased for a minimum of 100 years to prevent land speculation which in itself has caused more rises in housing affordability than any other cause. All land leased for domestic housing would require a building placed on it within two years or you forfeit the land. Water connections should be written off by councils over a 20 year period to keep the connection and maintenance costs lower to the consumer. All houses should be fitted with solar for daytime use, battery backup for the night and possibly a standby gas powered generator for rainy/cloudy days. All homes should have either high speed wireless connections or cable broadband, not the ADSL version proposed by the Libs.Governments should decentralise their departments into regional areas to provide incentives for public servants to move to regional areas. Medical practitioners would be required to serve a minimum time in a country town for experience before joining the city push. This would also make the country a good proposition for young marrieds to establish themselves. I dislike city life intensely with all of its go-go lifestyle resulting in not much time for anything.Sorry for the rant.

BILL ANDERSON:

09 May 2013 3:17:30pm

The answer is sitting to the north of Australia. It's a city state that has a 95% home ownership rate. It has few natural resources and a generation ago had a standard of living 1 third of Australia's. It is Singapore. It made housing more affordable for citizens through the Housing development board, which was a government run super scheme. The whole thing could work here except that people wouldn't be able to bleed others of their hard earned money whilst adding nothing to society as a whole. Singapore doesn't have negative gearing either, so the rediculous argument that these people are "providing houses to the poor is of course proven to be rubbish. Singapore is right and we are idiots whose children will one day turn on us. That's fair, we deserve it (I'm 50 by the way) but I call it like I see it.